Energy

Oil prices have risen to test 3-week highs, with prices finding support by expectations of tightening supplies in the short term outlook, putting concerns about demand on a back burner.

Half an hour after the release of the official weekly oil inventories report, oil prices had not responded significantly, remaining near the session lows.

Against a backdrop of rising OPEC+ supply and the potential for increased non-OPEC supply growth, mainly in the US, the crude oil forecast remains modestly bearish.

With China’s improving economic conditions, demand concerns have reduced and in the short-term there is little risk of an oil glut forming, but the slightly longer term outlook is a bit murky with the potential for another supply war to emerge between US shale and OPEC+ producers.

After rising in the first week of this year, oil prices are now showing a few signs of weakness as investors shift their focus towards Trump’s bearish energy agenda

The lack of a more positive response after the OPEC+ meeting shows the market is disappointed and thus even lower oil prices could be the outcome. Our crude oil outlook remains modestly bearish, as before.

This could be a pivotal week for the crude oil. With key US economic data on the horizon and the OPEC+ meeting later this week to discuss oil production targets, market participants are bracing for significant developments.

Given the rise in non-OPEC supply growth, the OPEC+ will be under pressure to support prices. But the group has said that it will gradually restore withheld supplies after multiple delays. What’s more, we could see a sharp rise in US drilling activity under Trump’s plans. As a result, we could potentially see a boost in both OPEC and non-OPEC production by 2025 and beyond.

Highlighting demand concerns, the OPEC has today cut its oil demand growth forecast again. This is the fourth month in a row that it has done so. Weak oil demand in China, the world’s largest oil consumer, remains the primary driver of falling prices.

The immediate response in the commodities space to the Republican’s clean sweep victory has been a bearish one - especially for industrial metals. Copper and silver fell over 4% each, tracking weaker iron ore prices, while gold was off by around 3%. Crude prices fell too but came sharply off their earlier lows.

Crude Oil Week Ahead: Crude oil wrapped up the third week of October with a sharp 9% loss, driven by weaker Chinese economic data and reduced concerns about oil supply disruptions. Looking ahead, key events between Chinese policies, BRICS, and PMIs are expected to influence crude oil’s trajectory in the coming week.